Quiz: Howstuffworks

Quiz: Cheap Housing 101

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About This Quiz

It can be tough to find an affordable place to live. Test your knowledge of cheap housing in our quiz and avoid becoming one of the 10.5 million U.S. households that pays more than 50 percent of its income toward rent or mortgage payments.

Which of the following types of apartments usually have cheaper rent?

apartments in older, historic buildings

studio apartments

apartments in buildings with doormen

The smaller the apartment, the cheaper the apartment usually is. So, if you're having trouble finding a place that fits within your budget, try something smaller like a studio or loft.

Housing costs are usually more expensive in what types of neighborhoods?

suburban neighborhoods

hip, urban neighborhoods

dense neighborhoods with more businesses and shops

Neighborhoods like the Village (in Manhattan) or the Mission (in San Francisco), attract a lot of renters and buyers because of their reputations as the hip places to live. That demand drives housing costs sky high. So, look at more out-of-the-way and up-and-coming areas to save money. Try to get in on the ground floor of the next hip neighborhood.

Financial advisers recommend that an individual or family spend what percentage of their after-tax income on housing?

somewhere between 20 and 35 percent

no more than 25 percent

somewhere between 30 and 50 percent

Factors like where you live and what other expenses you have will change how much you can or should spend on housing, but experts recommend spending between 20 and 35 percent of your monthly income on housing costs. That amount is based on after-tax income, so budget according to what you're bringing home, not your official salary.

What is a short sale?

a real estate transaction that involves a home being sold for less than the value of the loan

a real estate transaction that involves a home being sold to a buyer who can't make a down payment

another word for a foreclosure

A short sale is any property transaction where the final sale price is short of the total value of the loan. The bank agrees to take a loss in the short term to avoid expenses related to the property down the line, and the seller avoids having the home go into foreclosure. With some careful negotiating, a buyer can get a great deal on a new home through a short sale.

How is a short sale different from a foreclosure?

A short sale costs the bank more money.

A short sale does not involve the bank repossessing the home.

A short sale is the first step of the foreclosure process.

A short sale is an alternative to foreclosure that can have advantages for the bank and the seller. The seller avoids foreclosure, having their home repossessed and a damaged credit rating, and the lender can sometimes minimize its losses. But a bank typically won't agree to a short sale if it thinks it can get more money from a house through foreclosure proceedings.

How does the U.S. government define affordable housing?

housing that costs a household no more than half of their monthly, post-tax income

housing that costs a household no more than 30 percent of their monthly, post-tax income

housing that is priced 20 percent below the national monthly average

Any household spending more than 30 percent of its income on housing is spending more than it can afford, according to the U.S. government. The government uses the affordable housing definition to determine eligibility for federal aid programs.

According to a 2007 survey, what percentage of Americans spend more than 30 percent of their income on housing?

fewer than 50 percent

about 50 percent

more than 60 percent

More than 60 percent of Americans spend more than 30 percent of their monthly income, the national maximum of what can be considered affordable housing. Affordable housing is determined based on what each family can afford to spend, not based on prices and trends in the real estate market.

Which party is responsible for making repairs to a home during a short sale?

the buyer

the seller

the lender

Short sale properties are always sold "as-is," or in the condition that the buyer found them in. Since the seller is underwater on their mortgage, and the bank is trying to limit expenditures, it falls to the buyer to make any repairs after the deal closes.

How does the Section 8 housing program define a low-income family?

a family whose income is less than half of the national average

a family whose income is less than half of the average for the county where they live

a family whose income is below the poverty level

Eligibility for Section 8 housing assistance is based on how a household's income stacks up to the median income in the area. If you make less than half of the median, you are a low-income family.

What amount of a family's monthly housing costs does Section 8 vouchers cover?

100 percent of housing expenses

all housing expenses that exceed 50 percent of a family's monthly income

all housing expenses that exceed 30 percent of a family's monthly income

The Section 8 program uses the federal definition of affordable housing: No more than 30 percent of a household's monthly post-tax income can be spent on housing for it to be considered affordable. Section 8 households pay housing costs up to that 30 percent level, and the remainder is paid for by government.

Which of the following is NOT one of the reasons a lender can benefit from a short sale?

Short sales look better on a lender's financial statements than foreclosures.

Short sales can save the lender from making payments for repairs and insurance that are necessary after foreclosure.

Short sales can turn a profit for the lender.

By their definition, short sales can not turn a profit for the lender. The lender agrees to forgive the unpaid balance of the loan, in the expectation that it will cost less in the long run than the expensive, time-consuming foreclosure process.

True or False: Section 8 vouchers cannot be transferred from one part of the country to another.

TRUE

FALSE

False. Once a family receives Section 8 vouchers, they can use them in any part of the United States, as long as they notify their local housing authority in advance.

What is a roommate agreement?

an agreement that roommates can sign before moving in together that defines each party's financial responsibilities

an agreement that roommates can sign after going their separate ways to settle financial disputes

another word for a lease

A roommate agreement is a good way to protect yourself when you decide to move in with someone else, especially a complete stranger. The agreement sets out what everyone will pay each month, and any other agreements the roommates want to make. If your roommate ends up skipping town, having an agreement can help get them to pay you any money they might owe you.

What party(s) does the buyer have to negotiate with during a short sale transaction?

the lender

the seller

the lender and the seller

Short sales involve more negotiations than the traditional home sale, because both the seller and the lender have to agree to a price. Negotiating with the seller is no different than any normal home sale. But dealing with the lender takes extensive paperwork and documentation. And even then, the lender can simply say no.

Who usually pays an apartment referral service?

the prospective tenant

the landlord

no one, referral services are non-profit organizations

The key word here is "usually." In most cases, landlords and property managers pay referral services a fee for every tenant they bring in, so apartment hunters are able to use their services for free. But in the most competitive rental markets like New York and Chicago, where competition for renters is extremely stiff, tenants actually pay these services a fee, also.

Just like almost any other product, the prices that landlords charge for their apartments are negotiable. But it's important to go into landlord negotiations with knowledge of what fair prices are in a given neighborhood. Landlords won't take you seriously if you try to pass off an extremely low offer.

What was the average price of a house in the Southern United States in 2010?

$117,000

$147,000

$187,000

In 2010, the only place in the United States where home prices were lower than the South's $147,000 average was the Midwest, where the average home price was $132,000.

What was the average price of a house in the Western United States in 2010?

$238,000

$251,000

$291,000

Despite the housing crisis and economic recession, home prices in the Western United States stayed relatively high compared to the national average. While the West was the most expensive region in 2010 with an average home price of $238,000, New England came in a close second, with an average home price of $236,000.

What is "workamping"?

a type of job that gives you free rent for looking after a property

a federal program that gives the unemployed free housing on national park grounds

a campsite where homeless people can stay free of charge

A type of property caretaking that involves watching fair grounds, national parks or amusement parks in the off-season, workamping is a way for adventurous people to live nearly rent-free. Workampers often get free rent during the time they are watching the property, in exchange for some kind of work like landscaping, security or facilities maintenance.

What is an "approved short sale?"

a short sale that has already been approved by a lender

a sale that has passed required federal standards for short sale transactions

a short sale that has been closed and completed

An "approved short sale" is a type of property listing that indicates the seller has already agreed on an approved short sale price with their lender. These types of short sales are better for buyers, because they can avoid some of the complicated paperwork that is usually required for short sales.

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